Financial Crisis exacerbates labour unrest


The continuing turmoil in world financial markets is hitting the shipping industry in many ways, including a deterioration in onshore labour relations.

The worst financial climate seen in some 80 years, since 1929, is encouraging labour unrest in an increasing number of countries as workers strike in attempts to obtain better pay and conditions, according to The Strike Club, the mutual one-stop shop for delay cover.

The summer months were peppered with stoppages, said the club, which have not abated at a time when exporters are desperate to meet their Christmas and New Year commitments.

The club cites summer flashpoints in Argentina, New Zealand, India, Bangladesh, Greece, Canada (St. Lawrence Seaway), Brazil and France (Marseilles), Congo and Uruguay.

Bill Milligan, chief executive of the club managers, said : ”Shipping trade is slowing in many markets, ships are being operated at reduced speeds to save fuel costs, and the whole industry faces uncertainty. The financial and credit crisis is making the situation worse and clouding future prospects. All this spells industrial unrest.

“Also, there is uncertainty and upheaval in the insurance industry, which perhaps emphasises the benefits of mutuality.”
Commenting on the current position of the club, Mr Milligan said that it is not immune from the tightening financial restraints, and the effect on the club’s investments and combined fund. “However, the traditionally conservative and prudent investment policy of the club should ensure that the impact of these terribly difficult market conditions will be minimised, although investment returns this year are likely to be lower than average, he added.”

The Strike Club’s annual report and accounts, just published, records that during the underwriting year 2007/08 a total of 302 claims were presented at 143 different locations. 98 industrial dispute claims were lodged for incidents at 48 ports in 25 countries, while delay related incidents accounted for 204 claims and were spread across 106 locations and 51 different countries.

“Our experience shows once again that vessels can suffer random delays at various ports around the world,” says the club.

Net claims at January 31, 2008, of $13.2m. were appreciably higher than the $9.8m. total a year earlier. Total claims related to industrial disputes were $2.8m., with Canada and India topping the list. Claims for delay incidents totalled $7.7m. Of these claims, 43% related to grounding and stranding, 12% to machinery damage, and the remainder to port closures, storm and tempest, obstruction of navigable waterways, mechanical breakdown etc.

At January 31, 2008, the combined financial statements show that the insurance fund increased by $624,000 to $34.6m., including revaluation and net statutory reserves.

Reviewing the 2007/08 policy year at their latest meeting in June, the directors noted that income for Classes I and II increased by 20% – but that claims were currently around 27% higher. The underwriting accounts were showing a combined deficit of about 18%, with some $1m. claims still outstanding.

For Class III, income improved by 23% but current claims were 60% higher. The year was expected to show a deficit of around 10%, with $700,000 claims still outstanding.

The directors at their meeting recommended members to maintain a budget for a closing call of 20% in all three classes.

In 2007 the club received a first-time rating (BBB+ long-term counterparty credit and insurer financial strength) from Standard & Poor’s, which recently reaffirmed this rating with a stable outlook.

The club’s membership by region for 2007/08 was led by Europe (63%), followed by Asia and Australasia (27%). Bulkers represent by far the largest vessel type covered (60.11%), followed by cargo ships, containerships and tankers.